Contracts and tendering

What Is a Bid?

• The term bid refers to an offer made by an individual or 

corporation to purchase an asset. Buyers commonly make
bids at auctions and in various markets, such as the stock
market. Bids may also be made by companies that
compete for project contracts. When a buyer makes a bid,
they stipulate how much they're willing to pay for the
asset along with how much they are willing to purchase.1
• A bid also refers to the price at which a market maker is
willing to buy a security. But unlike retail buyers, market
makers must also display an ask price.
 How a Bid Works

• Buyers and sellers keep the market going.

Each participant facilitates the purchase and
sale of assets. Sellers are entities that provide 
assets for purchase. Buyers are those who
want to purchase goods or services. These two
parties normally come together at different
venues to conduct their business, including
auctions (live and online), the stock market,
and retail outlets
 Auction Bids
• Auctions are forums that bring together multiple buyers
who compete for certain assets, such as livestock, home
goods, properties, property tax liens, and art. These
venues are usually held in person but the rise in
technology has made online auctions a reality.
• Buyers who participate in auctions bid against each
other in order to win the asset through an open bidding
process. They do so by placing competitive bids in an
attempt to beat out the other buyers. The person who
bids the highest amount wins the auction.
 Online bidding
• sites work just like traditional auctions. Sites like eBay,
eBid, and QuiBids allow buyers to congregate in a virtual
arena and make bids for products and services of their
choosing.
• For instance, someone may be selling a pair of designer
sunglasses on eBay and starts an auction with a minimum
price. Interested buyers can bid on the item with an
amount they wish to pay until one person's bid is
accepted by the seller. These sites normally require
buyers to set up accounts and may also require payment
card information.
 Sealed bids
• Unlike the two types of bids noted above, participants in
some venues aren't privy to how much their competitors
are bidding. This is the case with sealed-bid auctions.
• A sealed-bid auction happens when multiple bidders are
given envelopes in which they place their bids. The
envelopes are then sealed so no one bidder can
knowingly outbid the other, making the outcome fair.
The highest bidder is the one who wins. This type of
bidding normally takes place for contracts or real estate
 sales
 Contract
• Contact is a kind of undertaking by a person or
a syndicate or a firm for the execution of any
type of work , for the supply of materials or
performance of any service in conection with
the execution of works
Contract is an agreement between two or more parties
to execute the construction works as per certain terms
and condition
Contract contains general and special conditions of
agreement, details of construction project work, their
specifications, time limits, payments and penalties for
delivery delays, etc. and ensures every party's rights
and obligations.
Contract document is a valid document that can be
enforced under a certain authority or law.
 Types of Construction Contracts

1. Lump-sum contract

2. Lumpsum scheduled contract

3. Unit price or item rate contract

4. Cost-plus percentage contract

5. Labour contract

6. Piecework contract
 Lump sum contract
Here the contractor commits to execute the work as per drawings and
specifications for a lump sum amount of money. There will be no unit
cost system and so the estimation for the whole work is somewhat
difficult. An experience is required for the contractors to accurately
estimate the amount of money that will be involved and so amateur
contractors are not preferred for this type of contract. However, in
bigger projects,payments can be made partially on mutually agreed
terms.
Its disadvantage involves that the contractor can discard the project if
the lump sum price exceeds the expectations of the owner.
Additionally, the contractor has to put up additional costs, otherwise
the owner may blame the contractor if additional cost
adds up after the start of the project.
lump sum and schedule contract –
It is the same as Lump sum contract except Schedule of
Rates (SOR) is also included in the agreement between the
owner and contractor. The lump sum price is displayed by
the contractor as well as Schedule of rates to regulate the
extra amount for any additional work afterwards.

Its disadvantage involves that similar to the lump sum

contract, every detail of the work is needed to be studied
thoroughly, otherwise disputes may arise if any additional
cost is added afterwards without the consent of the owner.
 Item Rate Contract In Construction (Types of Engineering contracts):

In Types of Engineering Contracts, the contractor quotes his rate per unit of
each item of the construction. An estimate of the bill of quantities is done
accurately. So that quantities of each item of work to be executed and the
contractor enters the unit rate against each item of work. The basis of the
agreement is thus the unit rate of each item. A little variation in estimated
quantities must be agreed upon by both
Parties.
The rate of the contractor for a unit of an item includes materials, labor.
Overhead cost and -profit. This contract is more important when the quality
of work, but not the exact quantities of the items to be executed, is
previously known. Major public work contract are if this form of contract,

Item rate contract is also called as Unit Price Contract.

 Cost plus a percentage contract
• Here, the work is awarded on the basis of the percentage of
actual cost for construction. The actual cost is handed over
to the owner where the owner pays the price along with a
certain It is suitable in case of work to be done rapidly or the
project cost is difficult to predict as a lump sum.
• Also, here the owner pays as per the performance of the
contractor and so the contractor tends to work more
attentively and guides his labours well.Moreover, the work
can be submitted to the owner before the completion of the
drawings and specifications. Also, speed is the advantage
here.
 Labour contract
• Sometimes, the owner is in a position to purchase the required materials
himself In such cases, he invites tenders only for the labor work. In These Types
of Engineering Contracts, the contractors put up their rates for the labor per
unit execution of each item. It is necessary to state that these rates include:
• Use of contractor’s plant and equipment
• All necessary falsework
• Contractor’s supervision
• Contractor’s profit

• The overall responsibility of the work is of the contractor, and he

• has to arrange in such a way that the proper rate of progress is
• maintained for the work. The owner has to see that the necessary
• materials are brought on-site as and when required.
 Classification of Contracts
1. Lump-sum contract
2. Cost plus a fixed percentage contract
3 Percentage rate contract
4. Item rate contract
5. Labour contract
6. Joint venture contract
7. Turn-key contract
8 Indirect lump-sum contract for flats or bungalows
9. BOT system
 Joint venture contract

• In case of huge important projects the

construction works can be categorised into
different parts and each part can be given to a
specialised contractor in that field. This
method improves the quality of work and the
project can be completed within a short period
of time. Thus the project works can be divided
among different contractors and hence joint
venture system of contract developed.
 Turn-key contract
• In this system all the works related to a project
including designing, planning, execution etc.
are to be done by the contractor. Once the
project is completed it is handed over to the
owner. The owner has to complete the
transaction works and occupy the structure by
simply turning the key, ie. opening the door
 BOT system Build operate and transfer
• cois a new system in which the land is acquired by the
Govt. and the contractor is asked to build the structure and
then operate it until he collects the money he had spent for
the construction, as fees from the users. Once the
construction cost is recovered, the structure is handed over
to the owner. No payment is made to the contractor by the
owner/Govt. Security is provided to the builder by the
Govt. regarding law and order problems if any. Bridges and
roads are usually constructed by adopting this system of
contract. Toll is collected from the users/vehicles passing
over it by the contractor to recover the construction st
 Pre tender planning
Planning undertaken by the contractor before submitting the bid
is known as Pre tender planning
It includes:
1. Site investigation and market survey
2. Examining drawing and specifications
3. Bidding trends of other contractors
4. Planning of resources-availailbility of
men,materials,machineries,skilled and unskilled labors
5. Identifying alternate method of construction
6. Time limit for each item of work
7. Deciding overheads,margins and finalizing the tender price
 TENDER
• It is an invitation from the owner to the
contractor to execute some work at specified
cost in specified time. It is published in the
form of tender notice in news papers, notice
boards, gussets, etc. according to the cost of
works.
 Procedure for inviting tender
1. Preparation of tender documents
2. Issue of notice inviting tender or tender call
notice
3. Submission and opening of tenders and their
scrutiny
4. Acceptance of tender and award of contract
Information to be given in a tender notice

1. Name of the department inviting tender

2. Name of work and location
3. Designation of officer inviting tender
4. Last date and time of receipt of tender
5. Period of availability of tender document
6. Cost of tender document
7. Time of completion and type of contract
8. Earnest Money Deposit to be paid
9. Date, time and place of opening the tender
10. Designation of the officer opening the tender
 Information to be given in a tender
document:
1General conditions of tender
2. Schedule of items of work with clear specifications
3. Special conditions
4 The notice inviting tender in specified form like PWD6
5. Layout plan, location of work
6. Division in which location is situated
7. Schedule of quantities of work
8 Nearest road/railway link
9. Set of drawings including working drawings
 Information to be given in a tender
document
10 Availability of materials in the vicinity . 11Detailed
specifications or reference to standard specifications
for each item of work
12. Complete architectural and structural drawings
13. Schedule of stores to be issued by the owner of the
project indicating the rates and their place of supply
14. Schedule of tools & plant and other facilities to be
made available by the owner, indicating the
conditions, hire charges and place of delivery
 Information to be given in a tender
document
• 12. Rate of supply of power and the point of supply
• 13. Location of water supply point
• 14. Time for completion and the progress to be
made at intervals of time
• 15. Conditions regarding employment of technical
personnel
• 16. Weather conditions in the area
• 17. Amount of EMD and the form in which it is to
be paid
 Information to be given in a tender
document
• 19Amount of Security deposit to be paid/ deducted
from running bills of contractors should be notified in
the tender call notice
• 20. Mode of payment for work done
• 21. Power to reject tenders without assigning reasons
• 22. Penalty conditions for slow progress and delay in
the completion of work
• 23. Designation of arbitration authority in case of
disputes
 CONTRACT DOCUMENTS
• When the tender of a contractor is accepted,
an agreement between the contractor and the
owner takes place and the documents defining
the rights and obligations of he owner and the
contractor are attached to the agreement
bond and this is called a contract document.
Each page of the contract document bears the
signature of the contractor and the accepting
authority and any correction in it is initialed.
• The eProcurement System enables the
Tenderers to download the Tender Schedule
free of cost and then submit the bids online
through this portal.